Absolute Power Corrupts Absolutely?: A Political Agency Theoretic Approach

Banerjee, Swapnendu and Saha, Soumyarup (2024): Absolute Power Corrupts Absolutely?: A Political Agency Theoretic Approach.

Abstract

We explore a power relationship between a ‘corrupt’ politician and a political worker where the politician can order an illegal corrupt effort to be performed by the worker. Using a moral hazard structure we show that when the politician’s power is sufficiently high the politician optimally uses power and relies less on wage incentives. But when the power is low, the politician optimally shuns power and relies more on wage incentives. We also talk about optimal bolstering of power through threats depending on the level of power of the politician. This model has implications on the larger principal-agent structure, although we model it as a political corruption game.

• Item Type: MPRA Paper
• Language: English
• Keywords: Power, Corruption, Hidden Action, Perception, Bolstering
• Subjects: D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D86 - Economics of Contract: Theory; J - Labor and Demographic Economics > J4 - Particular Labor Markets > J47 - Coercive Labor Markets; K - Law and Economics > K4 - Legal Procedure, the Legal System, and Illegal Behavior > K42 - Illegal Behavior and the Enforcement of Law

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